Stocks Mixed into Final Hour on Healthy Consolidation of Recent Gains

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs and Alternative Energy longs. I added to my (AAPL) long and took some profits in another long today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly negative as the advance/decline line is slightly lower, most sectors are declining and volume is about average. Investor anxiety is high, despite today’s mixed performance in the major averages. Today’s overall market action is neutral. The VIX is rising 4.0% today and remains relatively high at 23.0. The ISE Sentiment Index hit a depressed 68.0 and the total put/call hit a high 1.23 today. Finally, the NYSE Arms has been running above-average most of the day. Considering today’s economic data, recent stock gains and fall in the US dollar, today’s action is more impressive. I still think the recent parabolic rise in short interest, high cash levels at most funds, historically bearish sentiment readings and recent technical breakout in the S&P 500 should keep pullbacks relatively mild and short-lived. There looks to be a strong bid now under many market leading stocks that had been under severe pressure during this correction, which is a big positive. IBM’s(IBM) CFO said today that he feels better about their US business now than he did during the fourth quarter. (AAPL) said today that it will host a media event on March 6 and will discuss new iPhone “enterprise” features and release its software developer toolkit. MBIA’s(MBI) CEO said today that he does not expect rating agencies to take action on the companies’ ratings over the next year or longer, which is another large positive. (GS), which has recently been under significant pressure, is trading at session highs, up 4.2%. The 10-year swap spread is falling to 68.8 basis points over Treasuries today, down 13 basis points over the last week. Nikkei futures indicate a -120 open in Japan and DAX futures indicate a -5 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short covering, diminishing bond insurer angst and bargain hunting.